Great Graphic: R&D Expenditures

This Great Graphic was posted in the Wall Street Journal, which it got from R&D Magazine. It shows research and development expenditure in billions of dollars and as a percent of GDP. Expenditures in dollar terms favor the larger economies. This is in fact born out. The four largest economies have the largest R&D expenditures (US, China, Japan and Germany). Moreover, by using purchasing power parity currency conversion rates, the chart bolsters the value of the expenditures by those countries that have under-valued currencies. Nor are all PPP measures the same. The OECD estimates that Korean won is 30% under-valued and the yen is 7% over-valued. The Big Mac Index would have the yen 36% under-valued and the won 25% under-valued. As a percentage of GDP, South Korea is impressive, spending proportionately as much as Japan and more than the US and Germany. For a large country and for a country that is investing nearly 30% of GDP, China's R&D expenditures seem light. Lastly, we note that the US has been the first to implement the UN-based agreement to include R&D expenditures as investment for GDP purposes. Other countries will follow suit next year and in 2015.